Delhi High Court quashes FIR over Hemkunt Foundation’s COVID donations, finding no prima facie cheating or criminal breach of trust

An FIR was registered at the Special Cell, Delhi, under Sections 406, 420 and 120B IPC following secret information alleging suspicious financial activity by Hemkunt Foundation. The FIR alleged that the Foundation collected approximately ₹74.55 crore through appeals for COVID-19 relief, created fixed deposits and transferred ₹38.31 crore to Dhruva Healthcare LLP for land purchase.

The Foundation sought quashing under Section 482 CrPC, contending that no donor had complained of cheating or breach of trust and that the allegations did not establish the necessary ingredients of those offences.

The State opposed quashing, relying, among other things, on donor representations that donations were made specifically for COVID-19 relief and on the Foundation’s alleged failure to provide satisfactory utilisation records.

1. Whether the FIR and investigation materials, taken at face value, disclosed the ingredients of criminal breach of trust under Sections 405–406 IPC

2. Whether those materials disclosed cheating and dishonest inducement under Sections 415–420 IPC

3. Whether the FIR and consequential proceedings should be quashed under Section 482 CrPC, including the allegation under Section 120B IPC

Section 482 CrPC empowers the High Court to quash criminal proceedings in the categories identified in State of Haryana v. Bhajan Lal, including where allegations, even if accepted in their entirety, do not prima facie disclose an offence.

Sections 405–406 IPC require entrustment of property or dominion over it, followed by dishonest misappropriation, conversion, use or disposal in violation of law or contract; the Court relied on Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh, S.W. Palanitkar v. State of Bihar and CBI v. Duncans Agro Industries Ltd.

Sections 415–420 IPC require deception and dishonest or fraudulent inducement, with dishonest intention at the inception of the transaction; subsequent non-performance or deviation alone is insufficient.

The Court also relied on a coordinate Bench’s decision in M/s. PPK Newsclick Studio Pvt. Ltd. v. State (NCT of Delhi) concerning the absence of an aggrieved person in allegations of cheating and criminal breach of trust.

The Court held that the donations, once voluntarily made and accepted, transferred ownership to the Foundation and did not amount to property entrusted to it by donors; accordingly, the alleged transfer to Dhruva Healthcare LLP, creation of fixed deposits and failure to provide utilisation records did not establish criminal breach of trust absent entrustment.

As to cheating, the Court found no material in the FIR or investigation showing that the Foundation made the COVID-19 appeals with dishonest or fraudulent intent from the outset. It considered that the mere use of emotional appeals, or subsequent use of funds allegedly inconsistent with their stated purpose, did not establish deception at inception; it also noted the prosecution’s case that ₹5.18 crore had been spent on COVID-19 relief.

With the ingredients of Sections 406 and 420 IPC absent, the Court held that the Section 120B allegation could not independently sustain the FIR.

It allowed the petition under Section 482 CrPC and quashed FIR No. 18/2022, dated 22 January 2022, and all consequential proceedings; the pending application was also disposed of.